First-Time Homebuyer Guide: Step-by-Step Guide from Pre-Approval to Closing

Buying your first home is exciting, but it can also feel overwhelming. Between loan options, down payments, inspections, and closing paperwork, it is easy to wonder where to start.

This step-by-step guide walks you through the entire process from pre-approval to closing day so you know exactly what to expect.

Step 1: Determine Your Budget

Before looking at homes, it is important to understand what you can comfortably afford.

This includes:

Your monthly income, any existing debts such as car loans, student loans, and credit cards, down payment funds, estimated property taxes and homeowners insurance.

A mortgage professional will calculate your debt-to-income ratio to determine your maximum purchase price, but the right number is also about your comfort level.

Do not shop at the very top of your approval range unless you are comfortable with the payment.

Step 2: Get Pre-Approved

Pre-approval is one of the most important steps in the homebuying process.

During pre-approval, your lender will:

Pull Your Credit

Pull your credit

1. Pull your credit

2. Review income documentation

3. Verify employment

4. Calculate your maximum purchase price

5. Estimate your monthly payment

A pre-approval letter shows sellers you are serious and financially qualified.

In competitive Colorado markets, having a strong pre-approval can make the difference between winning and losing a home.

Step 3: Explore Loan and Down Payment Options

Many first-time buyers assume they need 20 percent down. That is not true.

Some common loan options include:

Conventional Loans

• As little as 3%down

• Private mortgage insurance required under 20 percent

• Flexible terms

FHA Loans

• 3.5 percent down minimum

• More flexible credit guidelines

• Popular with first-time buyers

VA Loans

• Zero percent down for eligible veterans and active-duty military

• No monthly mortgage insurance

Down Payment Assistance Programs

This is huge!

In Colorado, many buyers qualify for down payment assistance that can help cover down payment and closing costs or allow you to get into a home with minimal cash out of pocket.

Some programs also include special incentives for teachers, healthcare workers, and other community professionals.

Step 4: Start House Hunting

Once pre-approved, your real estate agent will help you:

Identify neighborhoods, schedule showings, write competitive offers, negotiate terms.

Your lender will help structure your offer strategically, including discussing seller concessions or rate buydown options.

Step 5: Make an Offer and Go Under Contract

When your offer is accepted, you enter the contract phase.

Key milestones during this stage include:

Earnest money, appraisal, loan underwriting review

Your lender will work behind the scenes to ensure your financing stays on track.

Step 6: Home Inspection and Appraisal

The inspection helps uncover any issues with the property. You may negotiate repairs or credits based on the findings.

The appraisal confirms the home’s value supports the loan amount. If the home appraises at or above the purchase price, you are in great shape.

Step 7: Final Loan Approval

During underwriting, the lender verifies updated documents, confirms employment, reviews the appraisal, and issues final loan approval.

At this stage, avoid opening new credit accounts, making large purchases, or changing jobs. Stability is important until closing.

Step 8: Closing Disclosure and Final Walkthrough

A few days before closing, you will receive your Closing Disclosure outlining final loan terms, interest rate, cash to close, and monthly payment.

You will also complete a final walkthrough of the home to ensure it is in agreed-upon condition.

Step 9: Closing Day

On closing day, you will sign your final loan documents, provide remaining funds if required, and receive your keys.

Congratulations, you are officially a homeowner!